Balance of Payments

• What is balance of payments?

  Annual statistics recorded of the money value of current, capital and financial transactions of Aus -> Rest of the world
• Credits?


  Cash inflow
• Debits?


  Cash outflow
• If Credit > Debit IN CAB?


  Current Account Surplus
• if Credit < Debit IN CAB?

  Current Account Deficit
• Components of the Current Account?

  Net primary income

  • income expecting to be repaid like interest, dividends etc

  Net secondary income

  • income not to be repaid like gifts

  Net goods

  Net services
• Components of the Capital account?

  Net capital transfers

  • Immigrants bring their money into our country

  Net acquisition of non-produced/financial assets

  • Copy right, Patents, Franchises
• Components of Financial Accounts?

  Net direct investments

  • more than 10% of asset owned (invested in)

  Net portfolio investment

  • less than 10% of asset owned (invested in)

  Net Financial Derivatives

  • Diff in credit/debit for financial contracts

  Net other investments

  • loans, deposits, etc

  Net reserve assets

  • RBA and govt transactions with foreign money

  Net errors and omissions

  • Reflects inaccuracies in calculations of the above stuff
• Relationship between CAB and CAFA?

  As the balance of payments is always 0, they both offset each other
• If always in CAD?

  We always need to get loans etc to offset the CAD. thus NFD increases
• Real Life?


  Aus was in CAD, but now in CAS after selling a lot to China
• Structural influences on CAB?

  • slow rises in labour costs, thus firms lower cost of production, thus prices = CAS
  • changes in cost of production = CAD
  • High overseas debt = CAD
• Cyclical influences on CAB?

  • Changes in cyclical conditions in AUS
  • Changing cyclical conditions in foreign countries

  (overall just affects on exports and imports)